spin88

UAL once again had the worst PRASM performance, continuing a trend going back to the begaining of the year.

traffic down (2.1%), load down (.7%) so loss of passangers was more than capacity cuts. They also lost ground with competators on revenue trends too, PRASM was down (2.5% to 3.5%) and MAINLINE was down (3.5% to 4.5%). Given that mainline is probably a better proxy for ability to attract high value premium traffic than overall number, they did very poorly.

AA's PRASM this month was up 4% (and they reported it would have been up another .4% had they not had operational issues), Delta's was up .5% (with load falling .4%), US was flat.

http://ir.unitedcontinentalholdings....826&highlight=

Another ugly revenue report.

channa

Wow, and operational performance wasn't so hot either. DL was a good 8 points above UA.

RobOnLI

These are the numbers that get the attention of the CEO and the Board. The number of elites leaving the airline is inconsequential to their day-to-day business; although I would venture to say that if the thread about how many elites left UA for AA's status match this summer is remotely true then Q3 was going to be worse as those defectors tried AA. Some are already coming back, though.

I have a feeling this quarter's report will be an eye opener for them and there will be some yelling going on in Chicago. Expect a statement from UA soon in which they explain the bad numbers and promise that Q4 will be better and that the future is paved with gold.

They can only fool themselves so long...

-RM

AAExPlat

As predicted. Q3 numbers for UA will be very ugly. When summer travel was going on, it masked the defection of the high yielding business travelers. Now, with those travelers sitting on the sidelines, UA will lag the rest of the pack even worse than they have been. 7% lower PRASM growth than AA which was plagued by a job action for most of the month of September. Those are some real dollar amounts...

TWA Fan 1

Looking for good news among all this, rest assured one number is not down:Jeff Smisek's compensation package.

That is certain to reassure the Street...

Bulldog83

Slightly OT, but is there any reason that PRASM is almost always reported on a percentage year-over-year basis? I get that this is important for investors looking for revenue growth, but it seems kind of misleading - doesn't having "bad" PRASM growth in September 2012 make it easier to have a "good" PRASM growth in September 2013?

UA-NYC

(waiting for those long claiming that there's no evidence of any loss of VFFs/high value flyers to finally eat some crow)

I'm confused - I thought the move to rewarding high fare flyers, regardless of status, was supposed to be a profitable one? To say nothing of the mass movement to holding off on releasing R/CPU space and instead offering cash buy-ups.

FWAAA

I think you make a good point. Much of AA's relatively good PRASM performance this year is merely catching up to the rest of the industry as AA's numbers lagged the industry thru much of 2010 and 2011. AA was unable to increase fares as well as its competition.

Some analysts have pointed to last summer's FAA shutdown (and temp cessation of the air travel excise taxes) as skewing this summer's numbers. Could be.

Still, when you look at the trend at UA since March 3, it's undeniable that things have deteriorated much more than at DL or AA (which is in Ch 11, for chrissakes, and should, by all rights, be hurting thanks to bankruptcy bookaway if nothing else).

spin88

you compare month to month (or quarter to quarter) as you have different business environments each month (June/July is different than September). What really matters though is how an airline stacks up to similar competitors over time. While this can bounce around, the factors should overall effect competitors in a similar way. For example the Japanese tsunami reduced Japan travel, so airline with more Japan exposure (DL and UA) should have better comps the next year. That said, these external factors should balance out over time. For example last months comps were effected (downwards) by having the revenue from uncollected ticket taxes in the 2011 comps. This effected all airlines the same though, no one had to pay the tax.

And American has cut capacity, yes, but when their PRASM goes up it shows they are getting more money per seat, which means people are (comparatively) paying AA more money to fly AA. You would expect the opposite, that people would avoid flying AA due to the BKR. Since AA has direct competition on probably 90% or more of the tickets it sells, and for probably 99% of the tickets it sells it has competition if a flyer is willing to add an extra stop, SOMETHING is allowing AA to sell its seats for more compared to a year ago, while UA is selling them for less. I seriously doubt that it is just magically able to rise prices now, absent some stronger reason to fly AA, if they had the pricing power before, AA would have raises its yield earlier.

The problem for UAL is that there is really no external factor or sets of factors that can explain why UA is under-performing the reset of its competitors by 3-5% (and with AA this month a midpoint of 7%) since 3/3, and really since the start of this year. UAL first said it had undersold around 3/3 (but them lead in IDBs in March and every subsequent month), then it claimed it was having problems with revenue management, now it is not saying, but implying, that its operational issues are effecting it.

The merger should have (and was sold as) increased PRASM by attracting new corporate/high value traffic for the enhanced network AND capturing more of the business of existing UA and CO customers through the larger network. Something is swamping these effects, and analysts are starting to talk and ask questions about why UAL is under-performing as to revenue.

I happen to think they have an unattractive mix of premium services AND poor policies towards frequent travelers compared to the competition and that people are defecting to AA and DL (or foreign carriers), but the evidence is mostly anecdotal. The poor PRASM numbers though strongly suggest UA is having a problem with premium passengers.

ncorman

New strategy.... get the numbers as low as possible and then make it an amazing turnaround story.

Wx4caster

Does it really matter, given you-know-who is also the CEO, and a board memeber (although, apparently no longer the Chairman according to Wikipedia).

TWA Fan 1

Very good analysis.

Airline mergers are never easy and this one is still relatively recent, so I think, in all fairness, we should give them a little more time to get it right.

But if there is a recent model of how to turn around an airline after a merger, it's DL.

Before the merger, DL was a embarrassingly burned out shell, NW was better, but hardly stellar.

While the merger saved money on overhead and operations, DL management did a very smart thing: They made substantial investments in areas that are obvious to the customer, renovating their J cabins, creating a near-best-in-class transcon service out of JFK, adding WiFi on virtually the entire fleet, substantially increasing the percentage of RJ's with FC cabins, renovating their Sky Clubs.

They also made a very concerted effort to train their people to be polite, friendly, professional. They also empowered them to make common sense decisions, even if the rulebook or computer disagreed.

Sure, there are still problems. DL still flies the DC9-50, an airplane so old it was designed in the Jurassic era. SkyPesos is universally despised, although it is truly not as bad as it is often made out to be (I have often compared awards on UA and DL and found that DL had better availability at a lower cost).

But the point is they made obvious improvements across the board that customers could perceive and they made a huge effort to improve CS.

UA, on the other hand, despite hollow promises of "making changes you will like," has made a number of very obvious blunders, cutting back benefits of their most valuable customers (elites may not be the most valuable, because elite status can be achieved on the cheap, but how could a GS not be a most valuable customer?).

In my opinion, much of the turmoil has come from imposing the CO approach on UA, even if the UA approach had worked well. I think of it as a likely combination of the insular corporate culture of CO, a big part of which was its superiority complex, and a gross miscalculation on the part of the CO senior management team how much harder it would be to run the combined airline than the stand-alone CO.

ibuyyoufly

Let's just face it, the Business model, Execution Strategy, FF programs (All Inclusive), Communication, IT systems and CO Management mindset/approach to the business, is not such this new company can hold onto the pmUA business passenger with any regularity. It's becoming more evident as the months roll on. They've lost the battle with Loyalty, at least from my perspective, and it's anyone's guess how long it would take under "proper" Management and circumstances to get it back, if at all. Handcuffed fortress hub customers will not be enough to make this business tick.

A MAJOR Fail for not knowing their customer, or if they did know, choosing to ignore their expectations.

It's all just very unfortunate. Could have been a 180 from the results they are now seeing.

It's in the BOD's hands.

trk1

Note that the largest domestic carrier Southwest was down 2-3% as well. Thus loss of high yield traffic is not the only analysis that can be made.

Also note that the actual figures still show American behind DL and United on an actual basis rather than a year by year % comparison

TWAWORLD

It i amazing to see how PMCO service and standards which make up the new airline have driven so many people away. I am surprised they aren't firing people for their failures in this merger. Loyal United passengers were used to premium services and not not the cheap policies of CO. United will continue to lose passengers as their service is not good at this point. UA was really turning around before this merger while CO was falling flat and that is evident in the performence after this meger. A two class 787 will not fix these problems.